Experience is the best teacher.

The title of this posting flows from a McKinsey article, “The perils of bad strategy,” Richard Rumelt, McKinsey Quarterly, 1st Jun 2011. [Richard Rumelt is the Harry and Elsa Kunin Professor of Business and Society at the UCLA Anderson School of Management. This article adapts his book, Good Strategy/Bad Strategy: The Difference and Why It Matters.]

“Despite the roar of voices equating strategy with ambition, leadership, vision, or planning, strategy is none of these. Rather, and it is coherent action backed by an argument. And the core of the strategist’s work is always the same: discover the crucial factors in a situation and design a way to coordinate and focus actions on dealing with them.”

In other words, experience is the best teacher. “You cannot deduce a good strategy from theory.”

A coherent action based on a believable argument is at the heart of a practitioner’s work; it distills the crucial factors of a problem and sharply defines the journey – pulling everyone’s efforts together.

Let’s revisit the blog’s reason for being, i.e., Reinventing Juan de la Cruz to win in the 21st century.

Why must we reinvent Juan de la Cruz?

Aren’t we the laughingstock of the region?

Where are we with AmBisyon? With Arangkada? With the scores of industry road maps?

Do we know the perils of bad strategy yet?

“How we wish our next secretary of the Department of Trade and Industry (DTI) would be known as the champion and booster of Philippine exports,” someone mused in a conversation. He came from knowing how far behind we have been left by our comparable Asean peers in export performance.

“The numbers are indeed glaring: over the last five years, we averaged only $70 billion a year in merchandise exports, while Indonesia earned $182, Thailand $246, Malaysia $248, Vietnam $268, and Singapore $401 billion. We’re not even near half of what Indonesia made the closest neighbor we trail.

“The new government simply must give focused and determined attention to this abysmal export performance, as in it lies the key to solving the major perennial challenges our economy keeps facing, namely: (1) lack of quality jobs, (2) low incomes and high levels of poverty, and (3) higher prices, especially of food, leading to wide food insecurity and malnutrition among our poor—in short, the basics of presyo, trabaho, and kita.” [“Doing a Vietnam,” Cielito F. Habito, NO FREE LUNCH, Philippine Daily Inquirer, 31st May 2022]

Let’s hear more from Rumelt: “A good “strategy” does more than move us toward a goal or vision; it acknowledges the challenges we face and provides an approach to overcoming them.

“Too many organizational leaders say they have a strategy when they do not. Instead, they espouse what I call “bad strategy.” Bad strategy ignores the power of choice and focus, trying instead to accommodate many conflicting demands and interests.

“Make no mistake: the creeping spread of bad strategy affects us all. Heavy with goals and slogans, governments have become less and less able to solve problems.

“I have condensed my list of its critical hallmarks to four points: (1) the failure to face the challenge, (2) mistaking goals for strategy, (3) “bad” strategic objectives, and (4) fluff.

“Failure to face the problem: A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge. If the challenge is not defined, it is difficult or impossible to assess the quality of the strategy. And, if you cannot evaluate that, you cannot reject a “bad strategy” or improve a good one.

“If you fail to identify and analyze the obstacles, you don’t have a strategy. Instead, you have a stretch goal, a budget, or a list of things you wish would happen.

“Mistaking goals for strategy: A few years ago, a CEO I’ll call Chad Logan asked me to work with the management team of his graphic-arts company on “strategic thinking.” Logan explained that his overall goal was simple—he called it the “20/20 plan.” Revenues were to grow at 20 percent a year, and the profit margin was 20 percent or higher.

“A leader may justly ask for “one last push,” but the leader’s job is more than that. The role of the leader—the strategist—is also to create the conditions that will make the push effective, to have a strategy worthy of the requisite effort.

“Bad strategic objectives: Another sign of bad strategy is fuzzy strategic objectives. One form this problem can take is a scrambled mess of things to accomplish—a dog’s dinner of goals. Often mislabeled as strategies or objectives, a long list of things to do is not a strategy. It is just a list of things to do. Such lists usually grow from planning meetings where many stakeholders suggest things they would like to see accomplished. Rather than focus on a few essential items, the group sweeps the whole day’s collection into the strategic plan.

“Then, in recognition that it is a dog’s dinner, the label “long term” is added, implying that none of these things are imperative today.

“Good strategy, in contrast, works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes.

“It also builds a bridge between the critical challenge at the heart of the strategy and action—between desire and immediate objectives that lie within grasp.

“Thus, the objectives that a good strategy sets stand a good chance of being accomplished, given existing resources and competencies.

“Fluff: A final hallmark of mediocrity and bad strategy is a simple abstraction—a flurry of fluff—designed to mask the absence of thought.

“Fluff is a restatement of the obvious, combined with a generous sprinkling of buzzwords that masquerade as expertise. Here is a quote from a major retail bank’s internal strategy memoranda: “Our fundamental strategy is one of customer-centric intermediation.”

“The phrase “customer-centric intermediation” is pure fluff. Remove the “fluff,” and you learn that the bank’s fundamental strategy is being a bank.

“Why so much bad strategy? A “bad strategy” has many roots, but I’ll focus on two here: (1) the inability to choose and (2) template-style planning—filling in the blanks with “vision, mission, values, strategies.”

“The inability to choose: Strategy involves focus and, therefore, choice. And choice means setting aside some goals in favor of others. When this hard work is absent, weak strategy is the result.

“Template-style strategy: This fascination with positive thinking has helped inspire ideas about charismatic leadership and the power of a shared vision, reducing them to something of a formula. The general outline goes like this: the transformational leader (1) develops or has a vision, (2) inspires people to sacrifice (change) for the good of the organization, and (3) empowers people to accomplish the vision.

“This template-style planning has been enthusiastically adopted by corporations, school boards, university presidents, and government agencies. Scan through such documents, and you will find pious statements of the obvious presented as if they were decisive insights.

“The enormous problem all this creates is that someone wishes to conceive and implement an effective strategy amid empty rhetoric and bad examples.

“The kernel of good strategy: By now, I hope you are fully awake to the dramatic differences between good and bad strategy. Let me close by trying to give you a leg up in “crafting” good strategies, which have a basic underlying structure:

1. A diagnosis: an explanation of the nature of the challenge. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as critical.

2. A guiding policy: an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.

3. Coherent actions: steps coordinated with one another to support the accomplishment of the guiding policy.

“A strategy is a form of problem-solving, and you cannot solve a problem you do not comprehend.

“The most effective leaders become strategists by focusing on the way forward promising the most extraordinary achievable progress—the path whose crux was solvable.

“You cannot deduce a good strategy from theory. Much of design combines imagination and knowledge about many other methods, copying some elements of each.

“To be a strategist, you must keep your actions and policies coherent with each other, not nullifying your efforts by having too many different initiatives or conflicting purposes.

“Becoming a Strategist: A strategy combines policy and action to surmount a high-stakes challenge. It is not a goal or wished-for end state. It is a form of problem-solving—you cannot solve a problem you do not comprehend. Thus, a challenge-based strategy begins with a broad description of the challenges—issues, and opportunities—facing the organization. They may be competitive, legal, due to changing social norms, or problems with the organization itself.

“In performing a diagnosis, the strategist seeks to understand why particular challenges have become salient, about the forces at work, and why the challenge seems complicated. In this work, we use the tools of analogy, reframing, comparison, and analysis to understand what is happening and what is critical.

“As understanding deepens, the strategist seeks the crux—the one challenge that both is critical and appears to be solvable. This narrowing down is the source of much of the strategist’s power, as the focus remains the cornerstone of the strategy.

“The strategist should understand the sources of “edge,” or power, or leverage relevant to the situation. To punch through the crux, you will use one or more of them. Willpower is not enough.

“To do strategy well, avoid the bright, shiny distractions that abound. Don’t spend days on mission statements; don’t start with goals in strategy work. Don’t get too caught up in the ninety-day chase around quarterly earnings results.

“Importantly, there are numerous pitfalls when executives work in a group, or workshop, to formulate strategy. There must be a process by which a small group of executives can do a challenge-based strategy, discover the crux, and create coherent actions to punch through those issues. It differs from strategic planning or other so-called strategy workshops, where the outcome is a long-term budget.”

The bottom line: Why are we the laughingstock of the region?

“The numbers are indeed glaring: over the last five years, we averaged only $70 billion a year in merchandise exports, while Indonesia earned $182, Thailand $246, Malaysia $248, Vietnam $268, and Singapore $401 billion. We’re not even near half of what Indonesia made the closest neighbor we trail.” [Habito, op. cit.]

In other words, despite AmBisyon Natin, Arangkada, and the scores of industry road maps, we are still a service-consumption economy courtesy of the over $50 billion generated by the OFW remittances and call centers.

On the other hand, our neighbors followed a simple mantra to become economic miracles: beg for Western money and technology. It was not to drive GDP by 6%-7%. The latest example is Vietnam.

Even before snatching Apple, Vietnam successfully attracted Samsung and catapulted them into an Asian export machine. For decades, we prided ourselves in having over 300 export processing zones.

Focus on one or two. No nation aspiring to attain industrialized status aggressively – as the Asian Tigers did – can focus on over 300 export projects.

Here’s Rumelt again: “Too many organizational leaders say they have a strategy when they do not. Instead, they espouse what I call “bad strategy.” Bad strategy ignores the power of choice and focus, trying instead to accommodate many conflicting demands and interests.

“Make no mistake: the creeping spread of bad strategy affects us all. Heavy with goals and slogans, governments have become less and less able to solve problems.”

Isn’t that familiar – given our inability to execute AmBisyon, Arangkada, and the scores of industry road maps?

Recall that the blog speaks to the Pareto principle – the “vital few” versus the “trivial many.” And Kurt Lewin’s force-field theory of exploiting the forces that drive us toward becoming the next Asian Tiger and overcoming those that restrain us.

Consider: We struggle with embracing personal responsibility in pursuing the common good because of our crab mentality. And that comes from our caste system. We pigeonhole Juan de la Cruz in his rank that the value of hierarchy and paternalism comes down to the common good be damned.

Enter: Mr. Ramon Ang and Senator Sonny Angara.

And here are quotes from an earlier posting:

“Our GDP per capita has been increasing but only incrementally. We must change this direction if we want more dramatic increases than the current.” [“Moving toward high-value industries and higher-paying jobs,” by Senator Sonny Angara, BETTER DAYS, Manila Bulletin, 4th Sep 2022]

“In real-world terms, we need $200 billion in export revenues to be on equal footing with our neighbors.

“Enter: The Philippine version of the Pearl River Delta Economic Zone.

“In other words, we need more than Bulacan airport. The excellent news is that Ramon Ang of San Miguel’s model will generate $200 billion in export revenues.

“Prioritize. Prioritize. Prioritize.

“NEDA, DTI, our think tanks, and legislators should do a rigorous benchmarking exercise to learn how Guangdong did it.

“In other words, we can continue with the zillion other LGU initiatives we want, take them as the “trivial many,” but prioritize our version of the Pearl River Delta Economic Zone.

“The object of the exercise is for the GDP to take a quantum leap.”

Experience is the best teacher. You cannot deduce a good strategy from theory.

A coherent action based on a believable argument is at the heart of a practitioner’s work; it distills the crucial factors of a problem and sharply defines the journey – pulling everyone’s efforts together.

“A strategy is a form of problem-solving, and you cannot solve a problem you do not comprehend.

“The most effective leaders become strategists by focusing on the way forward promising the most extraordinary achievable progress—the path whose crux was solvable.

“To be a strategist, you must keep your actions and policies coherent with each other, not nullifying your efforts by having too many different initiatives or conflicting purposes.

Let’s revisit the blog’s reason for being, i.e., Reinventing Juan de la Cruz to win in the 21st century.

Why must we reinvent Juan de la Cruz?

Recall how the blog defined freedom, democracy, and the free market: Personal responsibility is imperative in pursuing the common good. And in the case of the Philippines, it is becoming the next Asian Tiger. 

And in modern management lingo, there is “horizontal leadership.” It doesn’t come from formal authority yet is inherent in freedom and democracy – being self-government.

And we in the Philippine elite and chattering classes can demonstrate self-government by rolling up our sleeves.

Gising bayan!